NOX Terms

Allowance: Equivalent to one ton of emissions, allowances are used to cover the emissions from any given source.

Banking: Banking refers to the reservation of allowances for a future year. Banked allowances in the NOx market are not equivalent to a ton of emissions and are generally equivalent to a fraction of a ton.

CAIR: The Clean Air Interstate Rule is the EPA's newest program to reduce emissions and calls for each state to make a program to reduce emissions.

Flow Control: NOx has a built-in value reduction for banked allowances established to ensure that levels close to the established cap are achieved by limiting the value of banked allowances. If the number of banked allowances is more than 10% of the current vintage allocation, their value is reduced based on the following formula:
Banked allowances falling outside of the percentage that may be used at a 1:1 value may be used at a reduced 2:1 value

NATS: The National Allowance Tracking System, or NATS is used to keep track of the allowances held by each individual.

SIP: The State Implementation Program (SIP) is the cornerstone of the EPA's newest program to reduce ozone emissions. It allows each state to set a standard to which they will be accountable and use a cap-and-trade market to reduce their emissions.

"True Up": True up refers to the EPA’s freezing of account on November 30th to deduct used emissions allowances to ensure that accounts are balanced before new vintage allowances are issued. The period occurring between October and November, with all accounts being frozen on November 30th, following this, the EPA verifies emissions, and allowances equivalent to this year’s emissions are deducted from each account.

Vintage: Vintage refers to the issuing year of the allowance in question. The vintage may be “banked” or reserved for a future year if emissions have already been covered, however they do not maintain value over time (See Flow Control).